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Local Public Funding of Higher Education when Students and Skilled Workers are Mobile

Author

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  • Thomas Lange

    (University of Konstanz, ifo Institute for Economic Research Munich & University of Paderborn)

Abstract

The interregional mobility of high skilled workers might induce an underinvestment in local public higher education when sub-federal entities independently decide on education expenditures to maximize local output. This well-known result is due to interregional spillovers and provides a justification for coordinated education policy or rather a federal intervention. However, things might change completely when taking into account the interregional mobility of students. Now, local education expenditures not only affect labor migration (through wage differentials) but also student migration flows. The model in this paper then shows that local output maximization does not necessarily imply underprovision of higher education, since regions now have an incentive to attract students as future human capital. The stay rates of graduates in equilibrium and the sensitivity of wages to migration are key determinants of local policy. Furthermore, results depend on local government objectives or rather the weighting of natives relative to foreigners. Therefore, the paper also considers natives’ preferred local policy.

Suggested Citation

  • Thomas Lange, 2008. "Local Public Funding of Higher Education when Students and Skilled Workers are Mobile," Working Papers CIE 11, Paderborn University, CIE Center for International Economics.
    • Handle: RePEc:pdn:ciepap:11
    as

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    File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/ciepap/WP11.pdf
    File Function: First version, 2008
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    References listed on IDEAS

    as
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    6. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 547-562, August.
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    9. Panu Poutvaara, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," CESifo Economic Studies, CESifo Group, vol. 50(4), pages 663-684.
    10. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(2), pages 203-218, June.
    11. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, vol. 55(3), pages 409-412, September.
    12. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 247-258, May.
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    15. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(6), pages 587-606, December.
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    More about this item

    Keywords

    higher education; student mobility; labor mobility; local public finance;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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